Lendability within the BRRRR strategy

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Hey guys,

I am early in my journey, with one deal under my belt. I have stable income, but my goal is to use the BRRRR strategy to leverage equity/forced appreciation rather than constantly saving and contributing my own cash to deals.

After shopping the best rates, I applied for a HELOC against my first rental property, with the goal of pulling 30k-ish out to use to jumpstart my next deal. I was told that I could only borrow $7600 due to my DTI ratio and the worst case scenario of the interest rate spiking to I believe 16%. It's crazy because my DTI ratio is only at 33% or 26% if you consider my new rental income. I'm not terribly concerned with that particular lender. I'm sure I can get around it by taking out a home equity loan rather than the line of credit.

So the question is this: will this not become an issue every time I attempt to refinance and pull money out of a deal? 

Here's the scenario: I purchase a property using temporary financing, whether that means high interest(hard or private money) or short term(HELOC, etc). But then the rehab on my property wraps up, my tenants move in, and I'm stuck trying to finance something but struggling to get a lender to give me a loan. Is this too big a what-if to be concerned about? After all, supposedly I can keep borrowing up to a 41% DTI and 75% of all rent can be counted?

I'd love to hear from anyone, especially those with experience using HELOCS in the BRRRR strategy.

@Micah Watson

DTI ratio's are different for every lender. It is great that you found a lender willing to do a HELOC on an investment property as they are very hard to come by.

You can start out using renovation loans on the first couple of properties, but are limited to 4 properties total including subject and primary if the renovation loan is for an investment property. This eliminates having to pay upfront for the renovations. I have had clients purchase several properties in a years time. It does depend on your income, including the rentals. 

As far as rental income; 75% of rental income is true for properties that do not appear on your taxes yet. Property that you own, that is on your schedule E is calculated for rental income.

For the BRRR strategy typically investors refinance the mortgage with a cash out and the LTV's for an investment property are 75% for a SFR and 70% for a MFR.